Suchergebnisse

To make a summary of a book that contains so many different threads is no easy task. One should, on the one hand, refer to its conceptual contribution to the paradigm of sustainable agriculture, and on the other hand, consider the conclusions drawn from the studies conducted at international, national and regional level. It is clear that changing the paradigm of agricultural development from an industrial to a sustainable one will be neither easy nor quick. Agriculture must satisfy the demand for food products while lowering the pressure on the environment, providing for technological and biological progress, meeting the need to ensure a secure supply of food, and ensuring global economic, social and environmental rationality. The discussion in this book has concentrated chiefly on the last two questions. This is because certain dimensions of environmental and social rationality have so far been poorly researched. Environmental rationality means not only protecting the natural environment and reducing the pressure placed on it by agricultural production. The authors have pointed out that the assumption of an intrinsic value of land changes the expected productivity of capital in the sectors which utilise that production factor, namely in agriculture. This has far-reaching theoretical and practical consequences. The statistical data that have been presented demonstrate that utilities are discounted in Polish land prices to a much greater degree than would result from the agricultural functions of land. A similar situation is found in other EU countries. Where does this excess value of land come from? It is undoubtedly a result of the expectations of political rents, of speculative motives, and also of non-agricultural amenities provided by land. However, it is hard to determine the proportions of these factors. Moreover, new utilities of land have the nature of public goods, which further complicates the problem of seeking a market equilibrium. Similarly, recognition of the fact of the absolute and relative deprivation of farmers in the long term changes the balance of intersectoral flows, because it means a drainage of surplus from agriculture to other branches of agribusiness. This drainage is understood as a permanent mechanism by which economic rent flows out of agriculture as a result of market imperfections, in particular the flexible prices of agricultural products. More space should be given to studies of this problem in the world literature. 135 Poznan University of Economics and Business, anna.matuszczak@ue.poznan.pl Summary: Political Rents and the European Model of Agriculture 239 The second thread of the theoretical considerations relates to the problem of whether the concept of political rent, as found in the literature, fits the processes taking place in European agriculture. A review of the literature on rent seeking suggests that these theories provide only a partial explanation of the level of political rents and lobbying actions in European agriculture. Although there is a vast theoretical literature on rent seeking and collective action at global level, there is not much empirical work done with regard to these problems relating to the Common Agricultural Policy. Particularly problematic is the question of measuring political rents in particular EU member states. It has been found that, on a global level, it is European agriculture that best meets the criteria of viability and sustainability. Viewed against the backdrop of global agriculture, it is economically effective (in the institutional conditions guaranteed by the CAP), satisfies a variety of economic and social needs, and is developing in a way that reduces the burden on the environment. In 2012, based on the results of social consultations, the European Commission published a strategy and plan of action relating to the bioeconomy in Europe. The strategy creates a cohesive framework for a comprehensive approach to the solution of complex social problems (challenges) in Europe and worldwide. The measures undertaken with respect to the bioeconomy are focused on three pillars: investment in research, innovations and skills; strengthening the impact of the policy and engagement of interested parties; and strengthening competitiveness in sectors of the bioeconomy. The bioeconomy strategy represents an important step towards solving contemporary economic and social problems. The model of the development of agriculture in the EU can thus be considered an appropriate path to be followed in relatively densely populated countries, in which food producing area per capita is small. However, does this model require institutional support and the payment of political rents? The question arises as to whether these are in fact political rents, if in return society receives a package of specified benefits, and there is a net increase in social well-being. Empirical analyses have shown that up to the mid 1980s the level of support for agriculture in the EU (measured by the NRA indicator) was constantly increasing. The decline in support in subsequent years was maintained by payments of the decoupled type. Based on NRA values it can be concluded that nominal support in 2011 was at a level comparable to that recorded prior to the creation of an organisation of agricultural markets, that is, before 1962. This means that the CAP is distorting world prices to an ever smaller degree, and agricultural producers are losing their competitive advantages (although to differing extents). An important observation is the fact that, although the CAP applies to all member states, the level of support varies between those countries. In 2005-2011 it was the highest in Ireland, Slovenia, Poland, Belgium and the UK, and the lowest in Italy and Bulgaria. This observation 240 Summary: Political Rents and the European Model of Agriculture is confirmed by a second indicator constructed for the purposes of this research by the authors of Chapter 2.3 – the Farm Receipts Gap Estimate (FRGE). Despite the fact that in principle agricultural policy has a universal application, the amount of financial support given to agricultural producers measured as a percentage of gross farm receipts is not uniform between countries, with differences as high as 17 percentage points in 2012136 (cf. Table 2.4.). We should add that, according to the OECD, the value of the PSE for the whole of the European Union is 22.6% (of gross receipts). The differences between the PSE and the FRGE result partly from the methodology used for calculation. Most importantly, however, the FRGE shows how little uniformity there is across the EU in terms of support for agricultural producers in different countries. The differences are even more marked when we consider the contribution of pure political rent137 to the revenue of producers in various countries. In the Netherlands this contribution is just 4.3%, while for Ireland it is 25.8% (although the highest value, 28.7%, is recorded in Finland; cf. Table 3.12.). These data also demonstrate one more thing: that the PSE should not be used as a measure of political rents, because it significantly overstates them. The mechanisms shaping the structure of transfers in the selected countries also exhibited clear differences. This applies in particular to the two main streams of transfers: from taxpayers to producers and from consumers to producers. There has also been a gradual change in the structure of support, away from consumer transfers towards taxpayer transfers. This has resulted both from changes taking place in the global economy and the rise in prices of agricultural products, as well as from transformations in agriculture's role in the economy. A key part of the book proved to be Part 3, which presents the concept and the effects of long-term surplus drainage from agriculture under the various support models applied in the EU as regards equivalent payments (for specific public goods) and the different models for the taxation of agriculture. The analysis leads to what are called pure political rents, being what remains when the value of the aforementioned flows (drainage and net subsidies for public goods) is deducted from the sum of CAP subsidies. It should be noted that only rents calculated in this way meet the definition of political rent found in the public choice theory. Another important thread in this discussion concerns price fluctuations and their consequences. Agriculture is characterised by a high variability of prices in particular markets, which leads to adjustments of supply. This reaction is not always as described by neo-classical concepts – the spider's web and King's effects. Farmers' expectations in different countries may be more or less adaptive, and are sometimes 136 From 19.99% in the Netherlands to 36.96% in Ireland. 137 After adjusting the support by that part the receipt of which is conditional on the supply of specified public goods, and by the value of long-term drainage resulting from market failures. Summary: Political Rents and the European Model of Agriculture 241 rational. This depends on the degree of horizontal and vertical integration of sale channels, and on access to information. This price variability leads to unexpected flows of economic surplus into and out of agriculture, and in the authors' view, this produces a drainage effect in the long term. In response, there is a fluctuation in economic activity and in the economic situation in agriculture. This process is not uniform, however, and varies between different EU countries, as the authors observe. They propose an economic indicator based on surplus flows as a result of price fluctuations, based on an input-output table. The largest fluctuations were recorded in such countries as Germany, Denmark, the Czech Republic, Slovakia, Estonia and Lithuania. At the other extreme (with the smallest amplitudes of variation) are Portugal, Greece, Cyprus and Malta. At the same time, the value of the computed indicator determined the changes in farms' output and receipts, although in some countries this was a concurrent response, while in others it was delayed. This partly confirms the hypothesis that the outflow of economic rent from agriculture means a drop in productive activity, and vice versa (in some cases, however, such as in Poland, the response was delayed – recalling the spider's web theory). It was also shown that the relationship between the economic indicator and the production of agricultural raw materials differs between countries. In Germany, for example, the variation in output as a response to price changes is relatively low. Even in the most difficult period for agriculture (2009) production fell there by just 1%, compared with 15% in Portugal and as much as 30% in Poland, despite a smaller drop in the economic indicator. The authors believe this to be a result of the different agrarian structure, scale and technology of production, differences in the functioning of market institutions (integrative links, contracting systems), and the reactions of the producers themselves to the situation. To sum up, drawing conclusions about the general economic situation based on flows of economic rents is an atypical approach, but one that can identify the causes of variation in the productive activity on farms and help compare the scale of such variation between countries. This approach may also be a useful analytical tool for agricultural policy, which becomes particularly important in conditions of the intensification of processes of globalisation. In generalising the conclusions drawn from the analysis of the structure of CAP support in selected EU countries, three different models were identified138. Only 138 The structure of support is described based on the contribution of the following variables to total variable subsidies: X1 – the value of payments for public goods, being the sum of set-aside, agri-environmental and less favoured area payments and other subsidies for the development of rural areas; X2 – the value of subsidies for plant and animal production (the sum of other payments to plant and animal production plus the balance of subsidy and penalties for milk production, subsidy for other cattle production and subsidy for sheep and goat production); X3 – the value of single farm and area payments; X4 – the value of subsidies for indirect consumption; X5 – the value of investment subsidies. 242 Summary: Political Rents and the European Model of Agriculture two of them – model A (dominated by single farm and area payments, and with payments for the supply of public goods making up 17% of the total) and model C (combining different mechanisms of support for farms, with the highest contribution from payments for public goods, 33%) – were in accordance with the development priorities of the European agricultural model as defined in the new programming period of 2014-2020. These operated throughout most of the area of the EU in 2012, particularly in the new member states (cf. Figure 3.3.). Nonetheless, in most regions of the "old" EU-15 member states, the model in operation in 2012 was model B, oriented exclusively towards direct payments, which are treated as a substitute for support for production and produce a relatively weak stimulus for sustainable development. Further calculations showed that these countries receive more than 80% of the pure political rents derived from the CAP. There is also a large variation between EU countries as regards agricultural income. The tax systems applied to agriculture, however, are very similar (with certain exceptions, such as the case of Poland). They incorporate taxes on income, assets and consumption (VAT). The Polish system is different in that it does not include a tax on income from agricultural production. Based on an evaluation of the tax systems applied to agriculture in selected EU countries, it is possible to identify countries having the most restrictive tax policies towards agriculture (Belgium, Portugal, Ireland, Spain) and those where such policies are less restrictive (the UK, Germany, Italy, the Netherlands). Taking account of the long-term surplus drainage from agriculture and the net equivalent subsidies (in exchange for specific actions relating to public goods), an estimate was made of the value of "pure" political rents for individual countries of the EU-27. The analysis carried out here points to the conclusion that agricultural interventionism in the EU requires a special conceptual approach, since it is not sufficient to simply treat all subsidies as political rents. The new approach proposed by the authors is necessary, as it provides an indication of how to improve the effectiveness of allocation of support for agriculture in individual EU countries. Quantification of the political rent in agriculture enables a more rational and socially appropriate distribution of assistance from the CAP in accordance with the goals set for agricultural policy in the new financial framework after 2014. Although the division of payment envelopes between member states has already been decided, since 2014 the CAP has gained flexibility in terms of the structure of both pillars and transfers between them. These matters remain in the hands of the governments of member states. Another issue is the aforementioned contribution of political rents to the gross receipts from agriculture in a given country (cf. Tables 3.12. and 3.13.). On average in the EU-27 this contribution is 13.63%, and although in the EU-12 it is slightly Summary: Political Rents and the European Model of Agriculture 243 higher, and in the EU-15 somewhat lower than average, there are countries in which that value is exceeded almost twofold. Redefinition is required as regards the issue of social fairness in the determination of the sizes of national CAP envelopes. The calculations of political rents show that historical payments are neither a rational nor a just solution, because the structurally low profitability of agriculture in certain countries should be compensated for by a higher supply of public goods, and this is not happening. Perhaps countries with structurally inefficient agriculture should supply more public goods than they do at present, if they wish to maintain their current ratio of political rents to gross added value, or else subsidise their agriculture to a greater degree out of national funds. Part 4 of the book contains case studies. These demonstrate the applicative dimension of the paradigm of sustainable development and methods of evaluating the effectiveness of agricultural policy in supporting such development in rural areas. Naturally, the results of these studies are not representative for agriculture as a whole (at national or EU level). Nonetheless, they indicate a direction for discussion concerning the development of sustainable agriculture in theory and in practice, and provide methodological guidance. They develop a methodology for examining regional sustainable development, which enables not only a sustainability assessment, but also a comparison of synthetic indicators over the whole of the analysed period. Also a set of analytical models is proposed, which make possible not only a better management of human and material capital in firms in agricultural and food sectors, but also the identification of areas that need to be improved to enable these resources to be used more competitively. Among the detailed findings, the following are particularly striking: • The location-specific factor "type of rural area", based on land functions, is of key importance for land value in the SAPS. The area type determines whether particular use values, such as area or shape coefficient, and amenities, such as the possibility of building, as well as payments under agricultural policy, affect the land price. • There is a very large variation in land prices in the SAPS, and prices are strongly affected by speculation, which has driven the upward trend since the introduction of area payments in 2004. However, the impact of speculation is relatively small in areas with agrotouristic features. • Agricultural policy, in particular payments for public goods, has a very large significance (marginal effects) for the value of agricultural land compared with other parcel-level attributes of properties. • Payments for public goods are however capitalised in land prices only in peripheral areas. Elsewhere they fail to perform their role, and are even associated with the decapitalisation of the value of land. In particular, in 244 Summary: Political Rents and the European Model of Agriculture agrotouristic areas these schemes should be complementary and not substitutive with respect to the multifunctional development of the countryside. Therefore, in most places at present, single area payment support is not a differentiating factor for land value, in view of its general availability and low requirements, and the other payments do not compensate for the opportunity costs related to alternative ways of deriving rent from land. • Similarly, support for agrotouristic activity did not have a significant effect on the level of income from agrotourism among the analysed farms. This was because interest in such support came from those farms that did not yet obtain relatively high amounts of income from agrotourism; and moreover the instrument was not of a universal nature, but required the fulfilment of specified conditions. It can be expected that the situation was similar throughout Poland. • The relationships between agriculture and agrotourism are symbiotic in nature. Their common plane includes both the income of farms engaged in agricultural and agrotouristic activity, and the support provided by CAP instruments. In consequence, the preliminary conclusion can be reached that direct subsidies favour the economic activation of farms in non-agricultural activity. • The instruments of the CAP can be expected to evolve to favour the creation of public goods at local authority level rather than the development of agrotouristic activity itself at farm level. A particularly striking aspect of the findings of these case studies is that they point towards a common problem: the idea of payments for public goods under agricultural policy is set forth as a leitmotif of the European agricultural model, but in practice the CAP does not succeed in valuing these goods accurately. Perhaps this value is too low compared with the funds allocated indirectly to support production and efficiency, perversely given the name "decoupled"? Hence, the idea remains more a declaration than reality. This conclusion is confirmed by the variation in pure political rents obtained by agriculture (one might say non-equivalent rents) between EU countries in 2004-2012: ranging from approximately 9% of value added by agriculture in the Netherlands, to over 95% in Ireland. Are such disproportions, which it is hard to justify by any objective criteria, acceptable from the point of view of social justice and common community ideology? Alluding to the hypothesis put forward at the outset: there is something called the European model for the development of agriculture, but it is implemented in a minority of EU countries. Their common denominator is that pure political rent, after taking account of public goods and market corrections, accounts for a similar proportion of agricultural income. ; National Science Centre ; Bazyli Czyżewski

PART I. APPROACHING SUSTAINABLE AGRICULTURE – CONCEPT AND MEASUREMENT -- Environmental dimension of sustainability in agriculture -- Socio-economic resilience in rural areas -- How sustainable is agriculture worldwide?- PART II. EFFECTIVENESS OF CURRENT AGRICULTURAL POLICIES -- Cost-effectiveness analysis of environmental policy in different regions of the world -- Trade-offs between environmental and socio-economic performance -- PART III. EVOLUTION OF POLICY SCHEMES FOR SUSTAINABLE AGRICULTURE -- Evolution of agri-environmental schemes worldwide -- Comparing EU, USA and China's policy for sustainable agriculture -- Conclusions and recommendations.

In the article macroeconomic relations of prices, productivity and incomes in Polish agriculture in the context of changes in the EU Common Agricultural Policy were studied. The authors have developed a macroeconomic model which explains these relations and confirms the occurrence of market failures in agriculture in Poland. The developed model proves the existence of a puzzling exchangeable relation between the real productivity of production factors in agriculture, and agricultural incomes, under conditions of adaptive expectations. It also proves that it is price scissors, not the efficiency of production, that have a dominating influence on incomes in the sector. The authors propose the hypothesis that correction of market mechanisms by government intervention in agriculture is an objective necessity. However, direct subsidies (area payments) do not have a correcting role, but reinforce King's effect. First published online:13 Feb 2017

In the article macroeconomic relations of prices, productivity and incomes in Polish agriculture in the context of changes in the EU Common Agricultural Policy were studied. The authors have developed a macroeconomic model which explains these relations and confirms the occurrence of market failures in agriculture in Poland. The developed model proves the existence of a puzzling exchangeable relation between the real productivity of production factors in agriculture, and agricultural incomes, under conditions of adaptive expectations. It also proves that it is price scissors, not the efficiency of production, that have a dominating influence on incomes in the sector. The authors propose the hypothesis that correction of market mechanisms by government intervention in agriculture is an objective necessity. However, direct subsidies (area payments) do not have a correcting role, but reinforce King's effect. First published online:13 Feb 2017

Rural areas are typically characterised by uneven access to education and the resulting varying levels of pupils' educational attainment. The inefficiency of the education system may lead to a decreased level of human capital development in the society. It is therefore vital to identify the factors responsible for the inefficiency of the education system and take steps to mitigate their negative impact. The aim of the present study is to determine the relationship between the population density in rural areas, the pupils' average level of examination performance and the educational value added. The analyses were based on the exam results achieved by lower secondary school-leavers in 1,372 rural communes between 2012 and 2014. The original intention was to include all rural communesin the analysis. However, due to the incompleteness of the data concerning some of the communes, they were eventually excluded from the study. The final sample for analysis consisted of about 58% of all rural communes in Poland. The communes were divided into classes, based on the criterion of population density. The objects under study were arranged in an ascending order according to the value of the population density variable, and then divided into four classes (class A contained 25% of communes with the highest population density). The classes thus defined were used as a qualitative predictor in the subsequently performed ANOVA test. As a next step, contrasts were determined by applying a simple contrast to the analysed classes of communes. The analyses revealed that the highest examination results were achieved in the communes with the highest population density, while the lowest examination results were found in the communes with the lowest population density. This dependence may be indicative of educational negligence at lower levels of education, in this particular case - at the stage of primary school. The results of the analyses point to the need for expanding the network of nursery schools. To address the above problem, financial support should be provided from the state budget to social initiatives aimed at increasing the access to nursery schools, e.g. by creating an appropriate system of subsidies for nursery schools run by both local governments and private entities.

The statistical data presented here show that land prices in Poland discount a significantly greater quantity of utilities than would result from the agricultural functions of land. A similar situation exists in other EU countries. The question is where the excess value of land comes from. It is undoubtedly created by expectations of political rents and by speculative motives, but also by the non-agricultural utilities of the land. It is nonetheless difficult to determine the proportional contributions of these factors. A new theory of land rent should take account of the fact that in sustainable agriculture many new utilities of the land factor are created intrinsically, that is, without additional inputs of capital and labour. These have the status of public goods, and are paid for chiefly through agricultural policy (that is, through taxes). In this way the intrinsic utility of land takes the form of an economic rent, but we believe that this process may also take place through market channels. In this way history has come full circle, and the pure product of land as described by the physiocrats has been reactivated. ; National Science Centre ; Jan Polcyn

Globalizacja ekonomiczna przyspiesza obieg czynników produkcji w gospodarce. Nasuwa się pytanie, czy czynnik ziemi nadal tych warunkach tworzy renty ekonomiczne? Ricardiańskie renty różniczkowe zanikają, ale z drugiej strony ziemia zyskuje nowe użyteczności środowiskowe. Zgodnie z nowym paradygmatem rozwojowym rolnictwa dostarcza ona dobra publiczne. W warunkach daleko idącej akumulacji kapitału, która sprawia, że obszary wiejskie są środowiskiem antropogenicznym, nowe użyteczności czynnika ziemi mogą pojawić się paradoksalnie bez dodatkowych nakładów kapitału i pracy, a nawet dzięki ich zmniejszeniu. Jako dobra publiczne są one finansowane z subsydiów wspólnej polityki rolnej (WPR) UE. Celem artykułu jest przedstawienie ewolucji teorii renty gruntowej wraz z próba odpowiedzi na pytanie jaki charakter ma współczesna renta gruntowa? Autorzy testują nową koncepcję renty gruntowej, wykorzystując macierze przepływów międzygałęziowych między różnymi działami gospodarki wg NACE tworzącymi system agrobiznesu w wybranych krajach UE. Wyniki wskazują na prawdziwość tezy, że oczekiwana produktywność kapitału w rolnictwie właściwym jest wyższa niż w pozostałych sektorach agrobiznesu, choć nie z powodu eksploatacji czynnika pracy (jak to było w przypadku teorii marksowskiej), ale dzięki waloryzacji nowych użyteczności czynnika ziemi. ; The economic globalisation process makes economic factors rotate faster. There arises the crucial question of whether the land factor is still capable of generating economic rents ? On one hand, D. Ricardo's land rents are vanishing, on the other, the land factor is gaining new, environmental applications. It provides public goods, which are a crucial element of the new paradigm of agricultural development. In conditions of irreversible accumulation of capital in the anthropogenic environment, new land utilities may appear without any additional input of capital or labour, and, as public goods, they are mostly financed from subsidies for agriculture under the Common Agricultural Policy (CAP). This paper aims to present the evolution of land rents theory and to answer the question of what is the nature of contemporary land rent ? The author attempts to test the modern theory of land rent using input-output matrices for different sectors of agribusiness and chosen EU countries. He demonstrates the hypothesis that capital productivity in agriculture is higher than in other sectors of agribusiness, but not for the reason of exploiting labour (as was the case in Marxian theory) but thanks to the occurrence of intrinsic land utilities which are valorised. ; Jan Polcyn

The economic globalisation process makes economic factors rotate faster. There arises the crucial question of whether the land factor is still capable of generating economic rents ? On one hand, D. Ricardo's land rents are vanishing, on the other, the land factor is gaining new, environmental applications. It provides public goods, which are a crucial element of the new paradigm of agricultural development. In conditions of irreversible accumulation of capital in the anthropogenic environment, new land utilities may appear without any additional input of capital or labour, and, as public goods, they are mostly financed from subsidies for agriculture under the Common Agricultural Policy (CAP). This paper aims to present the evolution of land rents theory and to answer the question of what is the nature of contemporary land rent ? The author attempts to test the modern theory of land rent using input-output matrices for different sectors of agribusiness and chosen EU countries. He demonstrates the hypothesis that capital productivity in agriculture is higher than in other sectors of agribusiness, but not for the reason of exploiting labour (as was the case in Marxian theory) but thanks to the occurrence of intrinsic land utilities which are valorised. ; Globalizacja ekonomiczna przyspiesza obieg czynników produkcji w gospodarce. Nasuwa się pytanie, czy czynnik ziemi nadal tych warunkach tworzy renty ekonomiczne? Ricardiańskie renty różniczkowe zanikają, ale z drugiej strony ziemia zyskuje nowe użyteczności środowiskowe. Zgodnie z nowym paradygmatem rozwojowym rolnictwa dostarcza ona dobra publiczne. W warunkach daleko idącej akumulacji kapitału, która sprawia, że obszary wiejskie są środowiskiem antropogenicznym, nowe użyteczności czynnika ziemi mogą pojawić się paradoksalnie bez dodatkowych nakładów kapitału i pracy, a nawet dzięki ich zmniejszeniu. Jako dobra publiczne są one finansowane z subsydiów wspólnej polityki rolnej (WPR) UE. Celem artykułu jest przedstawienie ewolucji teorii renty gruntowej wraz z próba odpowiedzi na pytanie jaki charakter ma współczesna renta gruntowa? Autorzy testują nową koncepcję renty gruntowej, wykorzystując macierze przepływów międzygałęziowych między różnymi działami gospodarki wg NACE tworzącymi system agrobiznesu w wybranych krajach UE. Wyniki wskazują na prawdziwość tezy, że oczekiwana produktywność kapitału w rolnictwie właściwym jest wyższa niż w pozostałych sektorach agrobiznesu, choć nie z powodu eksploatacji czynnika pracy (jak to było w przypadku teorii marksowskiej), ale dzięki waloryzacji nowych użyteczności czynnika ziemi. ; Jan Polcyn

The statistical data presented here show that land prices in Poland discount a significantly greater quantity of utilities than would result from the agricultural functions of land. A similar situation exists in other EU countries. The question is where the excess value of land comes from. It is undoubtedly created by expectations of political rents and by speculative motives, but also by the non-agricultural utilities of the land. It is nonetheless difficult to determine the proportional contributions of these factors. A new theory of land rent should take account of the fact that in sustainable agriculture many new utilities of the land factor are created intrinsically, that is, without additional inputs of capital and labour. These have the status of public goods, and are paid for chiefly through agricultural policy (that is, through taxes). In this way the intrinsic utility of land takes the form of an economic rent, but we believe that this process may also take place through market channels. In this way history has come full circle, and the pure product of land as described by the physiocrats has been reactivated. ; Jan Polcyn

There is a consensus that farmers are subject to farm price-cost squeeze (PCS) when commodity prices fall and costs of production rise long-term. Willard Cochrane was the first to examine this phenomenon, introducing the notion that farmers are on a market treadmill. PCS is still a principle economic problem in agriculture touching farms in all over the world. It results from flexible prices but also from monopsony structures where recipients of commodities seize the opportunity of suboptimal pricing. Many studies indicate increasing retail farm price spreads but this lacks empirical studies on the effects of different types of subsidies on PCS. This work attempted to model EU Common Agricultural Policy (CAP) impact on PCS using the Constant Elasticity of Substitution (CES) production function, specified as in most CGE models. However, the authors tested the assumption of flexible prices reacting to changes in productivity. This approach is novel, while supported with an input-output analysis used to precisely decompose price and volume (productivity) effects at the level of a FADN representative farm. The results help to shape CAP shedding light on the present treadmill mechanism and showing that provision of public goods may be a remedy for market imperfections, whereas decoupled payments have the opposite influence.

There is a consensus that farmers are subject to farm price-cost squeeze (PCS) when commodity prices fall and costs of production rise long-term. Willard Cochrane was the first to examine this phenomenon, introducing the notion that farmers are on a market treadmill. PCS is still a principle economic problem in agriculture touching farms in all over the world. It results from flexible prices but also from monopsony structures where recipients of commodities seize the opportunity of suboptimal pricing. Many studies indicate increasing retail farm price spreads but this lacks empirical studies on the effects of different types of subsidies on PCS. This work attempted to model EU Common Agricultural Policy (CAP) impact on PCS using the Constant Elasticity of Substitution (CES) production function, specified as in most CGE models. However, the authors tested the assumption of flexible prices reacting to changes in productivity. This approach is novel, while supported with an input-output analysis used to precisely decompose price and volume (productivity) effects at the level of a FADN representative farm. The results help to shape CAP shedding light on the present treadmill mechanism and showing that provision of public goods may be a remedy for market imperfections, whereas decoupled payments have the opposite influence.

In the reality of the marketplace, a situation often arises where an economic surplus (rent) achieved by agricultural producers is partly taken over by related non-agricultural sectors. In this sense the category of economic rent embraces market failures related to such factors as price flexibility, and thus represents an effect of the misallocation of resources in the agricultural sector. The question therefore arises of whether there exists a developmental model of agriculture in which such market failures would be reduced. Apparently the only coherent response to this need is action taken under the paradigm of sustainable agriculture. This type of model for the sector's functioning is supported by the objectives of the European Union's Common Agricultural Policy (CAP), including through support for the supply of public goods in rural areas. This article addresses the question of whether CAP payments for public goods are a desirable systemic solution serving to reduce market failures. It is hypothesised that the financing of activity relating to the supply of public goods lessens the negative impact of the "market treadmill", since it reduces the unexpected outflows of economic surplus away from farms, caused by agricultural prices. To verify the hypothesis, a panel regression analysis was performed on three sets: the EU-15 countries, the EU-12 countries, and – within Poland – subsectors of farms from six standard output classes. The analysis covered the years 2004–2012. The results of the computations provided confirmation of the hypothesis. It may be stated that an increase in the level of payments for public goods, as a percentage of total subsidies to agriculture, leads on average to a reduction in the drainage of economic rents through prices. It was also found that the financing of public goods under the CAP is more effective in reducing market failures in the EU-15 countries than in the EU-12.